India
IBBI Proposes Four Amendments to Personal Guarantor Insolvency Rules
The Insolvency and Bankruptcy Board of India (IBBI) has announced four amendments to the insolvency resolution framework for personal guarantors of corporate debtors. The changes aim to strengthen safeguards for banks and other creditors and align the process more closely with the protections offered under the Corporate Insolvency Resolution Process (CIRP). The proposals have gained attention after the controversy over the repayment plan approved in the Subhash Chandra case, which raised concerns about creditor protection, large haircuts and the effectiveness of the Insolvency and Bankruptcy Code (IBC), 2016.
In the Subhash Chandra case, a single bench of the National Company Law Tribunal (NCLT) approved a repayment plan involving personal guarantor and Essel Group founder Subhash Chandra on 25 August. Creditors with admitted claims of ₹22,006.57 crore were offered only about ₹6.25 crore. Banks alleged that non‑bank entities involved in the process were associates or related parties of the guarantor and acted under his influence to support a plan with an exceptionally large haircut. A special NCLT bench subsequently stayed the single‑bench order.
The four key amendments proposed by IBBI are: 1. **Bar related parties from voting** – A related‑party creditor of the personal guarantor would be prohibited from voting on a repayment plan. Under CIRP, a related party of the corporate debtor cannot vote in the Committee of Creditors (CoC). The current personal‑guarantor framework only restricts an “associate”, a narrower definition. The change seeks to prevent conflict of interest and indirect influence by entities connected with the guarantor. 2. **Scrutiny of avoidance transactions** – The resolution professional (RP) would examine, during the resolution process, whether the guarantor was involved in preferential, undervalued or extortionate credit transactions. Findings would be presented to creditors before they vote on the repayment plan and before initiating legal proceedings. 3. **Mandatory independent asset valuation** – The RP must appoint a registered valuer to determine the fair value and realisable value of the guarantor’s assets. The valuation report would be provided to creditors with the repayment plan, enabling assessment of security adequacy, plan viability, potential recovery and whether accepting the plan is commercially preferable to bankruptcy. 4. **Record creditors’ commercial rationale** – Minutes of creditors’ meetings would capture detailed deliberations, objections, assessments and reasons for approving or rejecting the repayment plan. If the proposed repayment is substantially lower than admitted claims or the estimated realisable value, creditors must explain why accepting the plan is preferable to commencing bankruptcy.
The proposals aim to reinforce the core principles of the IBC—creditor protection, transparency, accountability, value maximisation and informed commercial decision‑making—while reducing the influence of connected entities and improving due diligence on the guarantor’s financial affairs.
Source: IE, last updated September 2026.